Going local down in Alcapulco
For multi-national companies transferring senior executives to the Americas (specifically focusing on Mexico, Argentina and Brazil), there are a number of key employment issues that should be considered to avoid complications for your expat employees. Applying for a different visa may give rise to the assumption of an employment relationship which would become particularly relevant on termination.
Expats in Mexico
When relocating to Mexico the first issue is to determine who will be assuming the employment relationship with the foreign individual. If the foreign company is paying the full salary and benefits then the relationship will remain with the foreign employer. The Mexican entity would not have to assume a local employment relationship, on the understanding that it is not making payment, compensation or benefits directly to the individual. This has to be clearly set-out in the assignment letter in order to avoid any misunderstandings and there is no need to enter into a local Employment
Agreement or to pay social security dues in Mexico. However, both the foreign and local entities should enter into a Services Agreement to determine the terms and conditions of the assignment, including financial terms between the legal entities.
The process of obtaining a Mexican immigration permit has to be consistent with the employment arrangement. If the individual remains an employee of the foreign company, then the correct immigration permit would be a: “Temporary Resident Visa/card with no permission to perform gainful activities”. Applying for a different visa may give rise to the assumption of an employment relationship which would become particularly relevant on termination. If the local entity pays any portion of the salary, compensation or benefits, then it would have to assume an employment relationship and the individual would be entitled to receive minimum mandatory labour and social security-related benefits and receive the same treatment as a local employee in Mexico. For this employment structure, the appropriate visa would be a regular work visa applied for while the individual employee is outside of Mexico.
Expats in Argentina
In Argentina, the territoriality principle applies to all individuals employed in Argentina, which means that all employment relationships are governed by Argentinean law regardless of the country where the contract has been signed or the nationalities of the parties. A written agreement with the local company will be required to apply for a working visa and the local company will have to be registered at Immigration National Direction. The contract of employment required by the Argentine immigration authorities has to provide the parties’ personal data, date and place of signature, tasks to be performed, position or category, salary, collective labour agreement, place of work and working time. Whilst the contract must cover the information above, a separate labour agreement should include additional benefits, obligations/prohibitions, the causes of gross misconduct and termination. Employers must verify the type of residence and length of stay in Argentina as this will affect the tax obligation. Taxation on an individual’s worldwide income is only for permanent residents and for temporary residents after five years. However, Argentina has double taxation treaties with different countries. Finally, under Argentinean law, the local company will have to contribute to the health and pension system as well as cover labour risks and it is common practice to provide private health insurance.
Expats in Brazil
The territoriality principle also applies in Brazil, so that all employment relationships are governed by Brazilian law, irrespective of place of execution and citizenship of the parties.
Again, a written agreement with the local company will be required to obtain a work visa, but no special form or content is needed except name, position, and salary.
However, it is recommended that content is included to bind the employee to the local company’s internal rules and policies, as the burden of proof in case of a dispute is on the employer. The type of work visa will be based on the employment agreement and will be renewable, but is normally granted for two years. There is no restriction on citizenship or length of stay, however, a work visa requires a ‘fair salary’ to protect the local workforce from ‘social dumping’. To obtain a visa for a statutory officer a letter of appointment and execution of corporate papers is required. As taxation is based on global payroll, it is advisable to verify the existence of double taxation treaties for income tax.
Article first published in “HR Director” – Global Mobility.